GlobeNewswire Inc | Nov 15, 2021 03:00PM EST

November 15, 2021

Record Quarterly Revenues; Revenues Increase 26%; Earnings per share of $0.11

COLUMBUS, OH, Nov. 15, 2021 (GLOBE NEWSWIRE) -- Intellinetics, Inc. (OTCQB: INLX), a cloud-based document solutions provider, announced financial results for the three and nine months ended September 30, 2021.

2021Third QuarterFinancial Highlights

-- Total Revenues increased 26% compared to the same period in 2020. -- Software as a Service Revenues increased 25% compared to the same period in 2020. -- Net Income of $296,437 increased 90% compared to the same period in 2020. -- Adjusted EBITDA of $538,488, compared to $374,615 from the same period in 2020. -- Net income per basic share of $0.11, compared to $0.06 from the same period in 2020.

2021Nine Month Financial Highlights

-- Total Revenues increased 57% compared to the same period in 2020. -- Software as a Service Revenues increased 39% compared to the same period in 2020. -- Net Income of $1,331,656, compared to Net Loss of $772,894 from the same period in 2020. -- Adjusted EBITDA of $1,332,162, compared to $441,774 from the same period in 2020. -- Net income per basic share of $0.47, including $0.30 cents positive impact from PPP forgiveness, compared to a net loss of $0.34 from the same period in 2020.

Summary 2021Third QuarterResults Revenues for the three months ended September 30, 2021 were $3,171,362 as compared with $2,511,282 for the same period in 2020. This constituted a record in our quarterly overall revenues, driven particularly by our document conversion segment. We reported a net income of $296,437 for the three months ended September 30, 2021 compared to $155,673 for the same period in 2020. The improved net income was the result of improved operating results, driven primarily by our record revenue quarter. Net income per basic and diluted share was $0.11 and $0.10, respectively, for the three months ended September 30, 2021, compared to net income per basic and diluted share of $0.06 for the three months ended September 30, 2020.

Summary 2021Nine Month Results Revenues for the nine months ended September 30, 2021 were $8,716,227 as compared with $5,557,586 for the same period in 2020. The increase in our professional services and storage and retrieval revenues is primarily due to the inclusion of a full nine months of revenues from our Graphic Sciences, Inc. subsidiary acquired in 2020, compared to the same period in 2020 that only included approximately seven months of revenues from that business. The year-over-year increase is amplified by the weak second quarter of 2020, due to the stay-at-home orders and resulting curtailment of revenue in that period. Intellinetics reported a net income of $1,331,656 for the nine months ended September 30, 2021 compared to a net loss of $772,894 for the same period in 2020. The improved net income was the result of improved operating results, no significant transaction costs in 2021, and a gain on extinguishment of debt of $845,083 from the full forgiveness of our PPP loan. Net income per basic and diluted share was $0.47 and $0.43, respectively, for the nine months ended September 30, 2021, compared to net loss per basic and diluted share of ($0.34) for the nine months ended September 30, 2020.

2021 Other Highlights

-- Cash flow increased by $1,447,378 net cash provided by operating activities for the nine months ended September 30, 2021. -- Invested in new warehouse to support growth of our storage and retrieval services, which increases box storage capacity more than 120%, and completed consolidation of warehouses from four to two for more logistics efficiency. -- Expanded K-12 footprint, closing 35 new districts in the nine months ended September 30, 2021, bringing us to about 250 school districts at the time of this release.

James F. DeSocio, President & CEO of Intellinetics, stated, In addition to beating our record quarterly revenue for the 2nd time in a row, this is the sixth consecutive positive Adjusted EBITDA quarter and fifth consecutive quarter exceeding $300,000. We continue to take several positive steps to increase our opportunities for growth. Weve fully transitioned to our new warehouse, which expands both storage and our production capabilities with office space at that location. Weve launched our enhanced Business Process Outsourcing (BPO) service, which is an additional recurring revenue stream. We are expanding our partner channel to build on the current success of our ERP partner program. We are strengthening our marketing initiatives to support cross-selling and net-new business sales targets, and at the same time were investing in increasing our sales team.

I am very happy with our Q3 results. In addition to an integrated sales team that have cross-selling targets now, we expect to have more opportunities for projects with new and existing customers with the increased amount of lead generation initiatives and continued promotion of our vastly expanded product offerings. We continue to expect, for this fiscal year, to build on the positive Adjusted EBITDA of 2020 and to drive revenue growth.

About Intellinetics, Inc.Intellinetics, Inc., located in Columbus, Ohio, empowers organizations to manage, store and protect their important documents and data. The company offers its IntelliCloudTM content management platform, in addition to business process outsourcing (BPO), document and micrographics scanning services, and records storage. Intellinetics guides companies through the digital transformation process to reduce risk, strengthen compliance and enable anytime, anywhere access to mission critical forms and documents. From highly regulated industries like Healthcare/Human Service Providers, K-12, Public Safety, and State and Local Governments, to businesses looking to move away from paper-based processes, Intellinetics is the all-in-one, compliant, document management solution. For additional information, please visit www.intellinetics.com.

Cautionary StatementStatements in this press release which are not purely historical, including statements regarding future business and growth, future revenues, including 2021 revenues and future revenue streams from new and existing customers and from Software as a Service sales, 2021 Adjusted EBITDA, cross-selling opportunities, future projects, new customers, expanded product offerings, the ability of our production capabilities to meet growing demand, future cash flow and other synergies associated with our 2020 acquisitions of Graphic Sciences and CEO Imaging and the success of our integration efforts, our other product and service offerings and marketing initiatives mentioned in this release, and in any other industry, market, initiative, service or innovation; cross-selling opportunities for Intellinetics future revenues, revenue consistency, growth and long-term value, including trends in revenue growth and mix; growth of software as a service, professional services, and maintenance revenue; market penetration; execution of Intellinetics business plan, strategy, direction and focus; and other intentions, beliefs, expectations, representations, projections, plans or strategies regarding future growth, financial results, and other future events are forward-looking statements. The forward-looking statements involve risks and uncertainties including, but not limited to, the risks associated with the effect of changing economic conditions, the impact of COVID-19 and related governmental actions and orders on customers, suppliers, employees and the economy and our industry, Intellinetics ability to execute on its business plan and strategy, customary risks attendant to acquisitions, trends in the products markets, variations in Intellinetics cash flow or adequacy of capital resources, market acceptance risks, the success of Intellinetics solutions providers, including human services, health care, and education, technical development risks, and other risks, uncertainties and other factors discussed from time to time in its reports filed with or furnished to the Securities and Exchange Commission, including in Intellinetics most recent annual report on Form 10-K as well as subsequently filed reports on Form 8-K. Intellinetics cautions investors not to place undue reliance on the forward-looking statements contained in this press release. Intellinetics disclaims any obligation and does not undertake to update or revise any forward-looking statements in this press release. Expanded and historical information is made available to the public by Intellinetics on its website atwww.intellinetics.com or at www.sec.gov.

CONTACT:Joe Spain, CFOIntellinetics, Inc. 614.921.8170 investors@intellinetics.com

Non-GAAP Financial MeasureIntellinetics uses non-GAAP Adjusted EBITDA as a supplemental measure of our performance that is not required by, or presented in accordance with, accounting principles generally accepted in the United States (GAAP).

A non-GAAP financial measure is a numerical measure of a company's financial performance that excludes or includes amounts so as to be different from the most directly comparable measure calculated and presented in accordance with GAAP in the statement of income, balance sheet or statement of cash flows of a company.Adjusted EBITDA is not a measurement of financial performance under GAAP and should not be considered as an alternative to net income, operating income, or any other performance measure derived in accordance with GAAP, or as an alternative to cash flow from operating activities or a measure of our liquidity.Intellinetics urges investors to review the reconciliation of non-GAAP Adjusted EBITDA to the comparable GAAP Net Income/(Loss), which is included in this press release, and not to rely on any single financial measure to evaluate Intellinetics financial performance.

We believe that Adjusted EBITDA is a useful performance measure and is used by us to facilitate a comparison of our operating performance on a consistent basis from period-to-period and to provide for a more complete understanding of factors and trends affecting our business than measures under GAAP can provide alone. We define Adjusted EBITDA as earnings before interest expense, any income taxes, depreciation and amortization expense, stock-based compensation, note conversion and note or equity offer warrant or stock expense, gain or loss on debt extinguishment, change in fair value of contingent consideration, and significant transaction costs.

Reconciliation of Net Income(Loss) to Adjusted EBITDA

For the Three months ended September 30, 2021 2020 Net income (loss) - GAAP $ 296,437 $ 155,673 Interest expense, net 113,030 115,498 Depreciation and amortization 105,923 89,475 Stock-based compensation 23,098 13,969 Adjusted EBITDA $ 538,488 $ 374,615

For the Nine months ended September 30, 2021 2020 Net income (loss) - GAAP $ 1,331,656 $ (772,894 )Interest expense, net 339,345 522,724 Depreciation and amortization 302,239 204,317 Stock-based compensation 126,794 90,152 Stock and warrant issue expense - 377,761 Significant transaction costs - 495,440 Change in fair value of earnout 77,211 - liabilitiesIncome tax benefit, net - (188,300 )Gain on extinguishment of debt (845,083 ) (287,426 )Adjusted EBITDA $ 1,332,162 $ 441,774

INTELLINETICS, INC. and SUBSIDIARYCondensed Consolidated Statements of Operations(Unaudited)

For the Three Months Ended For the Nine Months Ended September 30, September 30, 2021 2020 2021 2020 Revenues: Sale of $ 58,779 $ 53,767 $ 73,971 $ 153,999 softwareSoftware as a 352,192 281,810 1,052,072 756,497 serviceSoftwaremaintenance 336,732 340,129 1,012,251 915,483 servicesProfessional 2,165,030 1,615,445 5,715,273 3,221,154 servicesStorage andretrieval 258,629 220,131 862,660 510,453 servicesTotal revenues 3,171,362 2,511,282 8,716,227 5,557,586 Cost of revenues:Sale of 3,691 - 10,050 40,117 softwareSoftware as a 73,596 65,712 241,717 209,508 serviceSoftwaremaintenance 18,270 49,354 64,930 127,439 servicesProfessional 1,042,249 841,016 2,765,241 1,637,308 servicesStorage andretrieval 117,835 64,906 299,597 136,283 servicesTotal cost of 1,255,641 1,020,988 3,381,535 2,150,655 revenues Gross profit 1,915,721 1,490,294 5,334,692 3,406,931 Operating expenses:General and 1,027,932 844,186 3,125,019 2,533,046 administrativeChange in fairvalue of - - 77,211 - earnoutliabilitiesSignificanttransaction - - - 636,440 costsSales and 372,399 285,462 1,004,305 759,024 marketingDepreciationand 105,923 89,475 302,239 204,317 amortization Totaloperating 1,506,254 1,219,123 4,508,774 4,132,827 expenses Income (loss)from 409,467 271,171 825,918 (725,896 )operations Other income (expense)Gain onextinguishment - - 845,083 287,426 of debtInterest (113,030 ) (115,498 ) (339,345 ) (522,724 )expense, net Total otherincome (113,030 ) (115,498 ) 505,738 (235,298 )(expense) Income (loss)before income 296,437 155,673 1,331,656 (961,194 )taxes Income tax - - - 188,300 benefit Net income $ 296,437 $ 155,673 $ 1,331,656 $ (772,894 )(loss) Basic netincome (loss) $ 0.11 $ 0.06 $ 0.47 $ (0.34 )per share:Diluted netincome (loss) $ 0.10 $ 0.06 $ 0.43 $ (0.34 )per share: Weightedaverage numberof common 2,823,072 2,810,865 2,822,938 2,271,169 sharesoutstanding -basicWeightedaverage numberof common 3,104,334 2,810,865 3,105,175 2,271,169 sharesoutstanding -diluted

INTELLINETICS, INC. and SUBSIDIARYCondensed Consolidated Balance Sheets

ASSETS (unaudited) September 30, December 31, 2021 2020 Current assets: Cash $ 1,829,247 $ 1,907,882 Accounts receivable, net 948,508 792,380 Accounts receivable, unbilled 653,075 523,522 Parts and supplies, net 58,427 79,784 Other contract assets 70,412 31,283 Prepaid expenses and other current 190,134 130,883 assets Total current assets 3,749,803 3,465,734 Property and equipment, net 1,091,020 698,752 Right of use assets 4,005,709 2,641,005 Intangible assets, net 1,022,615 1,184,971 Goodwill 2,322,887 2,322,887 Other assets 14,784 31,284 Total assets $ 12,206,818 $ 10,344,633 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 121,525 $ 141,823 Accrued compensation 525,013 271,889 Accrued expenses, other 153,643 131,685 Lease liabilities - current 596,295 518,531 Deferred revenues 1,336,863 996,131 Deferred compensation 100,828 100,828 Earnout liabilities - current 923,109 877,522 Accrued interest payable - current - 5,941 Notes payable - current - 580,638 Total current 3,757,276 3,624,988 liabilities Long-term liabilities: Notes payable - net of current 1,701,926 1,802,184 portion Lease liabilities - net of current 3,491,765 2,196,951 portion Earnout liabilities - net of current 643,369 1,566,478 portion Total long-term 5,837,060 5,565,613 liabilities Total liabilities 9,594,336 9,190,601 Stockholders' equity: Common stock, $0.001 par value, 25,000,000 shares authorized; 2,823,072 and 2,810,865 shares issued 2,823 2,811 and outstanding at September 30, 2021 and December 31, 2020, respectively Additional paid-in capital 24,274,270 24,147,488 Accumulated deficit (21,664,611 ) (22,996,267 ) Total stockholders' 2,612,482 1,154,032 equity Total liabilities and $ 12,206,818 $ 10,344,633 stockholders' equity

INTELLINETICS, INC. and SUBSIDIARYCondensed Consolidated Statements of Cash Flows(Unaudited)

For the Nine Months Ended September 30, 2021 2020 Cash flows from operating activities: Net income (loss) $ 1,331,656 $ (772,894 )Adjustments to reconcile net income (loss) to net cash used in operating activities: Depreciation and amortization 302,239 204,317 Bad debt (recovery) expense (10,304 ) 40,325 Parts and supplies reserve change 9,000 10,500 Amortization of deferred financing 77,804 91,156 costs Amortization of beneficial conversion - 11,786 option Amortization of debt discount 80,000 62,222 Amortization of right of use asset 472,402 278,879 Stock issued for services 57,500 57,500 Stock options compensation 69,294 32,652 Note conversion stock issue expense - 141,000 Warrant issue expense - 236,761 Interest on converted debt - 176,106 Amortization of original issue - 18,296 discount on notes Gain on extinguishment of debt (845,083 ) (287,426 ) Change in fair value of earnout 77,211 - liabilitiesChanges in operating assets and liabilities: Accounts receivable (145,824 ) 333,121 Accounts receivable, unbilled (129,553 ) (204,248 ) Parts and supplies 12,357 5,105 Prepaid expenses and other current (42,751 ) (25,790 ) assets Accounts payable and accrued expenses 254,784 (589,461 ) Lease liabilities, current and (464,528 ) (269,748 ) long-term Deferred compensation - (16,338 ) Accrued interest, current and 442 4,504 long-term Deferred revenues 340,732 69,520 Total adjustments 115,722 380,739 Net cash provided by (used in) 1,447,378 (392,155 ) operating activities Cash flows from investing activities: Cash paid to acquire business, net of - (4,019,098 ) cash acquired Purchases of property and equipment (532,151 ) (55,603 ) Net cash used in investing activities (532,151 ) (4,074,701 ) Cash flows from financing activities: Payment of earnout liabilities (954,733 ) - Proceeds from issuance of common - 3,167,500 stock Offering costs paid on issuance of - (307,867 ) common stock Payment of deferred financing costs - (175,924 ) Proceeds from notes payable - 3,008,700 Repayment of notes payable - (70,000 ) Repayment of notes payable - related - (47,728 ) parties Net cash (used in) provided by (954,733 ) 5,574,681 financing activities Net (decrease) increase in cash (39,506 ) 1,107,825 Cash - beginning of period 1,907,882 404,165 Cash - end of period $ 1,868,376 $ 1,511,990 Supplemental disclosure of cash flow information: Cash paid during the period for $ 182,198 $ 142,018 interest Cash paid during the period for $ 2,106 $ 112,954 income taxes Supplemental disclosure of non-cash financing activities: Accrued interest notes payable $ - $ 796,074 converted to equity Accrued interest notes payable - 238,883 related parties converted to equity Discount on notes payable for - 320,000 beneficial conversion feature Discount on notes payable for - 135,292 warrants Notes payable converted to equity - 3,421,063 Notes payable converted to equity - - 1,465,515 related parties Right-of-use asset obtained in exchange for operating lease 1,837,106 - liability Supplemental disclosure of non-cashinvesting activities relating to business acquisitions: Cash $ - $ 17,269 Accounts receivable - 1,122,737 Accounts receivable, unbilled - 276,023 Parts and supplies - 91,396 Prepaid expenses - 73,116 Other current assets - 5,954 Right of use assets - 2,885,618 Property and equipment - 735,885 Intangible assets - 1,361,000 Accounts payable - (168,749 ) Accrued expenses - (162,426 ) Lease liabilities - (2,947,684 ) Federal and state taxes payable - (168,900 ) Deferred revenues - (198,659 ) Deferred tax liabilities, net - (149,900 ) Net assets acquired in acquisition - 2,772,680 Total goodwill acquired in - 2,322,887 acquisition Total purchase price of acquisition - 5,095,567 Purchase price of business acquisition financed with earnout - (889,200 ) liability Purchase price of business acquisition financed with installment - (170,000 ) payments Cash used in business acquisition $ - $ 4,036,367